Italy’s energy giant grows when some want it to shrink

ENI, a state-controlled oil-and-gas group established in 1953 to help Italy escape dependence on foreign firms, is growing. On November 23rd it announced the purchase of a share in several Ugandan oilfields from Heritage Oil, a small exploration firm. In October it announced the discovery of a big offshore gasfield in Venezuela and the award of a licence to develop a giant oilfield in Iraq. It is already developing one of the world’s biggest recent discoveries, Kashagan, beneath the Caspian Sea. By 2012 Eni expects to produce the equivalent of more than 2.1m barrels a day (b/d) of oil, up from 1.8m b/d last year.

There are signs of strain. The development of Kashagan has suffered from cost overruns, delays and a change in terms forced upon it by the government of Kazakhstan. Eni’s debts amount to over 40% of its equity, a higher level than most of its peers. It cut its dividend earlier this year. Profits were down by 59% in the first nine months of the year compared with the same period last year, to €4 billion ($6 billion), on sales that were down only 27% to €61 billion. Lower energy prices and falling demand have naturally hit Eni’s profits from production, refining, marketing and petrochemicals. …